Creditors can collect from business debtors who closed up shop

Creditors can collect from business debtors who closed up shop

On Behalf of | Nov 13, 2022 | Collections

Some may think that getting money from a no longer active business is like getting blood from a turnip. Nevertheless, it may still be possible to collect that money if the creditor proactively tracks down information about the debtor.

Due diligence is key

Before filing a lawsuit, the creditor should gather all available information on the business. For example, it might have several assets or entities that are separate or distinct from the owners or entities that incurred the debt or paid bills. It may also be a situation where the owners take company payments and move them into accounts not linked to the business.

Being “out of business” can mean many things

Different legal terms will affect the creditor’s ability to collect the debt. It could be a matter where the owners or executives told the customers, staff and vendors that they are closed, and no one is getting paid. Perhaps the space is even cleaned out. It may be a case where they took the money, packed up the assets, moved elsewhere, changed names and reopened. Despite their attempts, they may still be liable for the debt they incurred under the “closed” business.

Unknown owners may be involved

It also may be a situation where the person who ran the now-closed business may have had partners that the creditor was previously unaware of. Identifying these other unknown partners provides more collection options.

Collections attorneys can apply pressure

The scenarios outlined above generally involve people trying to avoid accountability. However, a collections attorney knows where to look for financial and administrative clues and track down the people or entities responsible for the debt, using legal tools like levies, adding the silent partners to a lawsuit, or finding other remedies.